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Ghana - Joint World Bank-IMF Debt Sustainability Analysis (English)

This report focuses on joint World Bank-IMF Debt Sustainability Analysis for Ghana. External and overall debt are at high risk of debt distress but remain sustainable. The shocks from Coronavirus (COVID-19) epidemic (collapse of oil prices, decline in trade, and lower non-commodity growth) are expected to deepen current account and fiscal deficits over the medium term resulting in a higher debt path compared to the November 2019 DSA. The end of exceptional spending items (COVID-19-related spending, financial sector restructuring) and the government’s commitment to the fiscal rule underpin the downward path of debt from 2022. Ghana enters the crisis relatively well prepared. External buffers have been strengthened with better-than-expected outturn in 2019 due to higher gold export receipts and remittances, and three billion US dollars Eurobond issue in early 2020. Contingent risks have been alleviated thanks to progress on the financial sector clean-up and the launch of the energy sector reform program. Gold prices (Ghana’s main export) boosted by the global flight to safety and the presale of most of 2020 cocoa harvest mitigate the impact of the shock this year. he standard stress tests have been augmented to reflect a possible scenario with a stronger outbreak and protracted national lockdown. Growth shock has been increased to two standard deviations and exchange rate depreciation has been increased to forty percent. Under these extreme shocks, debt still remains sustainable. Debt-service indicators are not on an explosive path. Furthermore, the DSA shocks likely exaggerate the impact on these indicators over the medium-long run given that, once the Coronavirus (COVID-19) emergency is solved and the elections are over, stressors such as risk premia, low commodity prices, and weak domestic revenues would improve significantly. Nevertheless, even under the baseline, risks to the outlook remain important. Risks depend primarily on the depth and duration of the Coronavirus (COVID-19) and oil price shock. Fiscal costs including pandemic response and measures to support economic activity could exceed those envisioned in the baseline and extend into 2021. A deeper global slowdown could have a greater impact on oil prices, private transfers and investment and further weaken the exchange rate. A more prolonged crisis could create additional liquidity risks into 2021. Stress tests show that, of these risks, exchange rate depreciation, and export and commodity prices shocks might have the greatest impact on debt sustainability.




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Ghana - Joint World Bank-IMF Debt Sustainability Analysis (English). Washington, D.C. : World Bank Group.